The NYMEX June natural gas futures contract settled 14.5 cents higher at $2.751/MMBtu Thursday as the market reacted to a government report showing a smaller-than-expected storage injection for the week ended April 24. US natural gas in storage rose 81 Bcf to 1.71 Tcf for the week ended April 24, the US Energy Information Administration said Thursday, below Platts' consensus expectations of an injection of between 84 Bcf and 88 Bcf.
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"People got caught by surprise," said Derek Salvino, vice president of research at Tradition Energy. "When I saw the [EIA storage] number myself, I did a double take."
However, Thursday's rally does nothing to change the natural gas market's bearish near-term fundamentals, Salvino said.
"I don't think it changes the fundamentals of injection season," he said. "We're going to see big healthy injections."
By the end of injection season this year, total storage stocks could even exceed the roughly 3.9 Tcf level seen at the end of last year's injection season, Salvino added, assuming a relatively mild summer.
"This injection didn't introduce any new fundamental information, but there's significant bearish fatigue after a five-month downtrend and traders are looking for an excuse to rally," Aaron Calder, senior market analyst at Gelber & Associates, wrote in a daily commentary.
Calder said that traders who were short the June contract were forced to exit, driving prices higher. In determining the near-term direction of prices, demand from coal-to-gas switching for power generation will be key, he added, especially because we are in shoulder season, a period during which heating demand tapers off.
"The continued strength of this rally will be determined by power generators' demand response," Calder said. "If demand can't hit another gear, this pop will be short-lived."
The National Weather Service, in its eight- to 14-day weather forecast, called for an elevated probability of below-normal temperatures across parts of Texas, the Southwest and the Rockies. It also called for an elevated probability of above-normal temperatures across large parts of the Northeast, Southeast, West and Midwest.
The June gas futures contract traded Thursday in a range of $2.557-$2.770/MMBtu.
The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).